On January 1, 2017, Eagle borrows $23,000 cash by signing a four-year, 9% instal

Question

On January 1, 2017, Eagle borrows $23,000 cash by signing a four-year, 9% installment note. The note requires four equal payments of $7,099, consisting of accrued interest and principal on December 31 of each year from 2017 through 2020. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round your intermediate calculations and final answers to the nearest dollar amount. Round all table values to 4 decimal places, and use the rounded table values in calculations.) Prepare the journal entries for Eagle to record the loan on January 1, 2017, and the four payments from December 31, 2017, through December 31, 2020.

Explanation / Answer

Answers

Period ending

Payment made (A)

Interest expense (B = D x 9%)

Reduction in Principal liability (C=A – B)

Principal Liability (D= D – C)

Note issued

$               23,000

31-Dec-17

$                7,099

$                    2,070

$                   5,029

$               17,971

31-Dec-18

$                7,099

$                    1,617

$                   5,482

$               12,489

31-Dec-19

$                7,099

$                    1,124

$                   5,975

$                  6,514

31-Dec-20

$                7,099

$                       585

$                   6,514

$                          0

Date

General Journal

Debit

Credit

01-Jan-17

Cash

$           23,000.00

Notes payable

$           23,000.00

(notes payable signed)

31-Dec-17

Interest expense

$              2,070.00

Notes payable

$              5,029.00

Cash

$             7,099.00

(1st instalment paid)

31-Dec-17

Interest expense

$              1,617.00

Cash

$              5,482.00

Cash

$             7,099.00

(2nd instalment paid)

31-Dec-17

Interest expense

$              1,124.00

Cash

$              5,975.00

Cash

$             7,099.00

(3rd instalment paid)

31-Dec-17

Interest expense

$                 585.00

Cash

$              6,514.00

Cash

$             7,099.00

(4th instalment paid)

Period ending

Payment made (A)

Interest expense (B = D x 9%)

Reduction in Principal liability (C=A – B)

Principal Liability (D= D – C)

Note issued

$               23,000

31-Dec-17

$                7,099

$                    2,070

$                   5,029

$               17,971

31-Dec-18

$                7,099

$                    1,617

$                   5,482

$               12,489

31-Dec-19

$                7,099

$                    1,124

$                   5,975

$                  6,514

31-Dec-20

$                7,099

$                       585

$                   6,514

$                          0

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